Interested in profiting from prediction markets as they enter the Canadian market? Recent research indicates that the chances of success may not be in your favor.
Prediction markets such as Polymarket and Kalshi enable users to bet on the likelihood of real-world events by trading contracts. In Canada, these markets will focus on events related to economic indicators, financial markets, and climate trends. For instance, current contracts on Polymarket include questions like “Will there be a Bank of Canada rate hike in 2026?” and “Will any month of 2026 be the hottest on record?”
Unlike traditional gambling setups, prediction markets do not have a house to play against. Instead, participants compete against each other, with the markets earning revenue through small transaction fees for each bet placed.
A recent study by Yale University and London Business School researchers reveals that only three percent of Polymarket accounts, identified as “skilled traders,” consistently made profits and accurate predictions. The majority of losing traders funded these profits.
With these markets poised to expand into Canada through Wealthsimple’s collaboration with Kalshi, experts advise Canadians to understand their competition.
“You need to be sophisticated,” emphasized Roberto Gómez-Cram, co-author of the study and an assistant professor of finance at the London Business School, in an interview with CBC News.
“If you are just clicking there, you will be eaten alive.”
Supporting the Winning Few
The unreleased research paper, based on data from Polymarket, covers $13.76 billion US in trading volume across 1.72 million accounts. It indicates that nearly 70 percent of trading volume originates from less skilled traders, implying that winners largely benefit from the mistakes of the majority.
Since there is no house to compete against, the system relies on substantial trading activity to operate effectively. The more users invest in contracts, the more funds flow into the platform, leading to increased earnings for skilled traders.
Market operators suggest that a collective prediction on an event generates a “wisdom of the crowd,” resulting in remarkably accurate outcomes. However, the researchers argue that these accurate results stem mainly from a minority of skilled traders.